VOL. 128 | NO. 205 | Monday, October 21, 2013
First Horizon Reports Third Quarter Loss
By Andy Meek
The Memphis-based parent company of the largest bank based in Tennessee swung to a third quarter loss, with a $200 million addition to its mortgage repurchase reserve contributing to a loss for the quarter of $107.5 million.
First Horizon National Corp., the parent of First Tennessee Bank, reported $25.8 million in net income during the same period in 2012. Referring to the red ink for the just-ended quarter, company chairman and CEO Bryan Jordan conveyed a frustration at times that comes with the company’s progress in winding down its national mortgage business.
But he also said he’s proud of what the First Horizon team has accomplished in continuing to build up the company’s business, which in the third quarter included First Tennessee grabbing the No. 1 market share ranking in Tennessee. That’s according to the most recent customer deposit data from the Federal Deposit Insurance Corp. Also during the quarter, the bank’s revenues were up 2 percent from the second quarter, and the bank’s pursuit of “profitable, high-quality loans” led to gains in both consumer and commercial lending.
On the capital markets side, FTN Financial – a division of First Tennessee – continued to underscore its importance to the company as a whole, with fixed income average daily revenue of $850,000. For the third quarter, First Horizon reported revenue of $309.3 million, down from $337 million one year earlier but up from the second quarter’s $302.6 million in revenue.
“Our bankers are generating very good momentum growing our business and improving credit quality,” Jordan said, adding that the bank also continues performing well in capital markets despite an uncertain interest rate environment. “As we approach our 150th anniversary in March, we’re focused on positioning our business for the next 150 years.”
First Horizon’s headcount in the third quarter was down almost 4 percent compared to a year earlier – from 4,507 employees to 4,338, though it added a few since the second quarter, when the headcount stood at 4,296.
Deposits were up over the two third-quarter periods from $16.22 billion to $16.28 billion. The company has bought back $262.7 million in shares as part of a $300 million share repurchase program launched in the fourth quarter of 2011, and First Horizon paid a $0.05 per-common-share quarterly dividend Oct. 1 and a preferred quarterly dividend of $1.6 million Oct. 10.
First Horizon also said it reached an agreement in principle this week with Fannie Mae to resolve certain representation and warranty repurchase obligations for the First Tennessee book of business. The terms of that agreement are subject to final approval by Fannie Mae’s board of directors and by the Federal Housing Finance Agency.
Wunderlich Securities Inc. downgraded First Horizon shares a few weeks ago to “hold” from “buy,” following a visit with company management. Wunderlich’s outlook on the company’s shares is “incrementally more cautious,” explained Wunderlich bank analyst Kevin Reynolds, because of “a persistently difficult environment with near-term headwinds impacting both (First Horizon’s) spread-based banking business as well as its fixed-income sales operation.”
“In order for First Horizon shares to move meaningfully higher, one of two things has to happen,” Reynolds told The Daily News. “Either short-term rates have to rise, or the company has to sell itself, neither of which appears likely over the next 24 months. To me, this quarter is not about that $200 million (addition to the repurchase reserve). It’s about the trends on the other side. In order for this stock to work on its own, they have to approach the profitability targets they keep talking about.”